How Much Income and Down Payment do You *Really* Need to Buy a Home in Seattle?

The local media is picking up on an article written by HSH.com that could depress Seattle area home buyers regarding how much income is needed to buy a home in various metropolitan cities. The report relies on data provided by NAR and… ready for this… claims that you need to have an income of $73,851.06 in order to buy a home in the Emerald City.

This is based on a median sales price of $339,900 with a 20% down payment of  $67,980 (causing even more pain and anguish for first time home buyers) and a front end ratio of 28%.  With most mortgage programs, more weight is given to the “back ratio” than the front ratio with 45% DTI (debt to income ratio) being more commonly accepted than a 28% front end ratio.

Let’s take a look at how much income it takes to qualify for a $339,900 priced home in Seattle based on current mortgage programs and rates. NOTE: Rates are of course subject to change (they WILL change) and credit approval.  Mortgage rates are as of May 21, 2014 at 3:25 pm. Click here if you would like to have a current rate quote.

All scenarios below are based on a sales price of $339,900 and credit scores of 740 or higher for a purchase in greater Seattle that is closing in 30 days.  I am using $50 per month for home owners insurance (hopefully I’m estimating on the high side) and 1.25% of the sales price for the estimated real estate taxes – this all factors into the qualifying ratios. Let’s also assume the home buyers have $500 in monthly debts (car loans, credit cards, etc.) that we need to factor into their debt to income ratios. Let’s also assume that the sellers are not contributing towards closing cost.

Home Possible Mortgage – gross annual income needed to qualify: $72,000  Down payment: 5%.

• 30 year fixed conventional mortgage at $332,905
• 4.375% (apr 4.946%)
• PITI payment estimated at $2,196.57
• Estimated funds due at closing: 26,233.94

Home Advantage Mortgage – gross annual income needed to qualify: $73,000.  Down payment: 3% and Home Advantage down payment assistance available.

• 30 year fixed conventional mortgage at $329,703.00
• 5.000% (apr 5.383%)
• PITI payment estimated at $2230.60
• Down payment assistance of $13,132 at 0% apr with payments deferred for 30 years or due when the home is sold.
• Estimated funds due at closing: $9,046.

House Key Opportunity Mortgage state bond program (funds are limited) – gross annual income needed to qualify: $67,000. Down payment 3% and using Home Advantage Rebound dpa.

• 30 year fixed conventional at $329,703.00
• 3.500% (apr 4.073%)
• PITI payment estiamted at $1,986.70
• Down payment assistance of $10,000 at 0% apr with payments deferred for 30 years or due when the home is sold.
• Estimated funds due at closing: $11,087

Conventional Mortgage – gross annual income needed to qualify: $67,000. Down payment 10%

• 30 year fixed conventional mortgage at $305,910
• 4.125% (apr 4.517%)
• PITI payment estimated at $1,998.82
• Estimated funds due at closing: $44,229

This is just a small example, and I’m not even including adjustable rate mortgages – just sticking with a 30 year fixed rate mortgage.  If you are considering buying a home in Seattle or anywhere in Washington state, I’m happy to review your options with you and help you with your mortgage needs.